TEMPE, Ariz. — The slowing global economy is on track for modest growth in 2022, but the odds of a slowdown that could reduce cross-border trade next year are increasing, the country’s top economist said. airline industry.
Marie Owens Thomsen, chief economist at the International Air Transport Association, recently assigned a 20% risk to a recession in the near future.
Unemployment, inflation, consumer spending and the direction of China’s economy emerging from widespread COVID lockdowns will be key indicators that could turn more negative next year.
“I think 2022 could be a bit of a sweet spot where people don’t really care about inflation and they’re so eager to get back to some semblance of normality” in terms of travel and spending, he said. she said in an interview following her presentation at an air cargo industry conference here last week. After that, soaring prices for goods and services could force consumers to retreat.
Experts forecast economic growth of 3% to 3.5% this year, compared to 6.1% in 2021, with the war in Europe reducing the expected GDP by one point.
“It’s going to be tough to accelerate from there,” said Owens Thomsen.
Air cargo volumes were already slowing from the rapid pace of 2021 when war in Europe broke out. According to estimates by IATA and other market analysts, global air shipping demand fell about 5% in March and even more in April from a year earlier. IATA is expected to release April figures this week, but the decline in shipping volumes extends into May due to limited production from factories in China due to extreme anti-COVID measures.
On Wednesday, Xeneta’s Clive Data Services, a source of air freight market data, said air freight volumes in May fell 8% year-over-year, mirroring the decline in April.
Some analysts expect air freight demand to rebound quickly as China’s export pipeline reopens with the end of lockdowns. But few are ready to predict how long the upward demand cycle will last and whether it will continue during the peak season from late August.
IATA expects the airline industry to fully recover from the pandemic in 2024, which should increase international cargo capacity. But a recession could derail those efforts.
Owens Thomsen said in the interview that systematic headwinds such as climate change, the Russian invasion of Ukraine and protectionism pose a challenge to long-term growth.
Many economists predict long-term global economic growth of 2%, but if society does not address these major issues, productivity could fall below that, she said. Change will be even more difficult due to political polarization.
“Anything introspective is anti-connectivity. When you move away from connectivity, you are likely to get worse economic results. People don’t hold hands. This is a negative message for long-term structural growth,” the IATA economist said.
The transition to a sustainable energy future, said Owens Thomsen, is necessary to ensure prosperity. Then fossil fuels will no longer be a constraint to economic growth or the cause of geopolitical friction.
“Peace has been the most growth-friendly policy anyone has ever invented. The energy transition is therefore the key to a better future,” she said at the CNS Partnership conference.
More FreightWaves/American Shipper stories by Eric Kulisch.
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Air cargo market likely to decline as export orders contract